Is my friend's "drop-out" claim even remotely true?

The key words there are “social contract”. This is not a new argument. The social contract as it is used states:

So, in order for us to be part of society, we must give some of our rights. This is false, and I know you think it is false because you are a voluntaryist. But, where is this contract? Did you sign it? Did I sign it? At best, your friend could be said to have signed one as a naturalized citizen, but that doesn’t make this so called contract valid.

The American state essentially owns everyone and everything within it. Surely your friend can realize that this is not a just position. Does your friend really think that his house belongs to the state? Why does he call it his house? It’s entirely possible that your friend really does believe that the state legitimately owns everyone and everything in its territory, but since you have said that he is making progress, I think that this is probably not the case.

So, is your friend familiar with the concept of homesteading? Perhaps you should start there with him. If you demonstrate a fairly simple idea (first use) as to how people come to own property (well they can trade it too), perhaps it will be easier for him to see why this social contract is invalid. Also, you may wish to teach him a little bit about common law. It is not might first choice of a system of law, but it is far more decentralized that statutory law. So if your friend’s objection to a voluntary society is that there needs to be a state in order to have law, then this is an obviously false claim. And you can back it up with the huge history of common law. Common law does not require a state, and a lot of our modern legal principals originated in common law.

Also, I don’t know if you have read these, but What Law Is and A Praxeological Account of Law are entirely relevant to the question of how law in a voluntary society could work. It may be hard to convince him by making him read the posts, but if you can find a way to rearticulate the arguments, then you may have better luck.